The former head of Credit Suisse India and Lehman Brothers India has said that it’s time for a digital Indian rupee, which would aid financial inclusion.
In an article with The Hindu, Ajeya Singh said that since India’s demonetization last November, which saw the Indian government ban two of the country’s biggest banknotes, the Rs 500 and the Rs 1,000, digital transactions have increased. These have been through the use of credit cards, digital wallets, Bharat Interface for Money (BHIM), an app that enables fast, secure and reliable cashless payments through a person’s phone, and Aadhaar pay, a digital payments platform for merchants.
Yet, while cash accounts for more than 95 percent of transactions in India, rural and semi-urban populations don’t have access to this financial inclusion, according to Singh.
It is imperative to introduce digital fiat currency as part of the remonetisation of the economy for monetary sovereignty and policy effectiveness.
Nod of Approval to the Blockchain
In January, researchers from the Reserve Bank of India (RBI) announced that blockchain’s technology had matured enough that it was deemed possible to support digitization of India’s fiat currency, the rupee.
Such a nod of approval from the RBI indicates that the country is keen to embrace the technology considering that the government’s sweeping reform in November saw 86 percent of all Indian paper money in circulation become obsolete overnight.
Same Characteristics of the Indian Cash Rupee
According to Singh, he hopes the Indian government will issue a digital fiat currency, which would be known as the digital Indian Rupee and would be legal tender, accepted throughout the country.
With full backing from the government, the amount of digital Indian Rupees in circulation would be controlled the same as notes and coins are, says Singh, but it would have two distinct advantages over paper currency: namely, that it would be transacted remotely between two parties without the need for ID and it would be tamper-proof.
The digital currency would bring more innovation, competition, better consumer protection, more consumer choices, more open access and better regulatory transparency.
It remains to be seen whether India does get its own digital Indian rupee. However, with a country that has seen an increase in digital payments since its demonetization, it appears that such a move would be in the right direction for the nation, which would greatly benefit those financially excluded too.
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